Whether the CENVAT credit is admissible on Capital goods used in the manufacture of exempted goods?

PJ/Case Laws/2012-13/1126

Case:- COMMISSIONER OF C.EX. , CHANDIGARH VERSUS S.T. COTTEX EXPORT PVT.LTD

Citation: - 2012 (26) S.T.R 65 (P&H)

Issue: - Whether the CENVAT credit is admissible on Capital goods used in the manufacture of exempted goods?

Brief fact: -The assessee is manufacturer of cotton yarn and other items. For period from January, 2005 to March, 2005, it cleared goods under Notification No. 30/2004-C.E., dated 9-7-2004, it claimed Cenvat credit on capital goods used in the manufacturing. The amount involved was Rs. 75,798/-.
The adjudicating authority after issuance of notice confirmed the demand of duty on the ground that since the final goods were exempted, the Cenvat credit was not admissible in view of Rule 6(4) of the Cenvat Credit Rules, 2005. The order-in-original was up-held by the Appellate Authority. On further appeal by the assessee, the Tribunal set aside the same, holding that it was not a case of availing of Cenvat credit in respect of capital goods used in manufacture of exempted goods as by virtue of Notification No. 29/ 2004-C.E., dated 9-7-2004, 4% duty was payable on the manufactured goods.

Revenue’s Contention:- The Appellant submits that even though Notification dated 9-7-2004 was in force, the same provided for optional duty and the assessee never invoked the said notification. In such a situation, the view of the Tribunal is against the view taken by it inCCE, Indore v. Surya Roshni Ltd. - 2003 (155) E.L.T. 481 (T) which was upheld by the Supreme Court [2003 (158) E.L.T. A273 (S.C.)]. As per the said judgment, on capital goods which are exclusively used in manufacture of exempted goods, credit was not available. Subsequent withdrawal of exemption could not validate the credit wrongly taken.

Reasoning of Judgment: - The Present case is not a case of subsequent withdrawal of exemption as in the case of Surya Roshni Notification dated 9-7-2004 is prior to the period of January, 2005 to March, 2005.
In view of finding of the Tribunal that the assessee availed benefit of notification under which 4% duty was payable, it cannot be held that assessee used the capital goods in manufacture of exempted goods in which case the assessee could not claim the benefit of Cenvat credit under Rule 6(4).

Decision: - Appeal dismissed

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PJ/Case Laws/2012-13/1126

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